Tuesday, June 19, 2012

Today's 2012 Mid-year construction forecast

Associated Builders and Contractors, Inc. presented its Mid-year construction forecast today.
 The presenting economists were: Anirban Basu, Kermit Baker and David Crowe.

Here's a quick list of observations and predictions from the presentations (which all refer to national trends):

  • Financing is still a big problem for potential construction projects.
  • Commercial construction feeds of residential construction, and residential construction has been slight, thus leading to less commercial construction.
  • Growth in commercial construction usually comes in 18 months after GDP turns around but we're not seeing that this time.
  • We're now seeing the lowest level of non-residential construction in 30 years.
  • Commercial property values have recovered more than single-family, though.
  • Forecast:  Strengthening in 2013
  • There are now signs of growth, but growth will be sluggish.
  • Recovery in construction is slow by standards of other recessions.
  • Worst year ever last year (2011) for home sales - according to one home builders index.
  • Multifmaily index does show growth, the multifamily sector is doing much better .
  • In new household formation, renter households are now becoming much more common than owner households.
  • Jobs are an issueL: nationwide, we're still 5 million jobs below December 2007 levels.
  • No industry has lost more jobs than construction
  • The consensus that we'll see slight improvement this year, and acceleration next year - this could easily be challenged because signs of confidence are sparse.
  • National construction employment has continued to deteriorate in recent months. "The trend is not positive."
  • Input prices for construction (prices in construction materials) are down due mostly to decline in oil prices and decline in demand overseas. 
  • Materials and capital are not barriers, but lack of confidence is a problem.
  • "Capital remains too scared" about future trends to begin major spending.
  • We're 4 to 5 years away from a large portion of current renters drifting into homeownership.
  • Current renters do plan to buy at some point
  • But we're looking at several years before we see a decline in the current renter trend.
  • A lot of the states that will suffer most (post election) are those states that depend the most on federal spending.